Prepared Remarks of Ken Corbin,
Commissioner, Wage & Investment Division
Before the Council for Electronic Revenue Communication Advancement (CERCA)
May 16, 2018
Good afternoon. I’m Ken Corbin, Commissioner of Wage and Investment. It’s a pleasure to see everyone again here at your spring meeting. I’d like to start by saying we at the IRS owe a big thank-you to everyone in this room. We deeply appreciate the partnership we have with CERCA. We need partners like you in order to succeed in fulfilling our dual mission of tax compliance and taxpayer service.
Today I want to talk about the filing season that just ended and provide a few updates on IRS programs and achievements.
We have just completed the 2018 Filing Season. Overall, this filing season went smoothly for taxpayers and for the Service thanks to the hard work and dedication of the IRS workforce and our partners. Just getting to filing season this year was a challenge. As you recall last fall there were several hurricanes and wildfires that struck the country back to back to back and affected many taxpayers. We had to make decision on how to treat tax extenders, and then came the passage of the most sweeping changes to U.S. tax law in over 30 years (which I’ll talk more about later). But thanks to a lot of planning and the help of our partners like you, we were able to open the filing season as planned on January 29.
Although the filing season went well overall, I must mention the elephant in the room. As I’m sure you’re all probably aware, the IRS experienced a significant hardware failure on Tax Day this year. Although there was an outage due to system issues, taxpayers were still able to file their tax returns electronically through their software providers and Free File. Thanks to the cooperation of this group of partners, we were able to put service to the taxpayer first and minimize the impact the taxpaying public. In fact, to put it in perspective, MeF started processing around noon on January 8 when we started taking in business returns. Except for scheduled maintenance windows on Sundays, which we make all transmitters aware of ahead of time in order to not be disruptive to taxpayers, MeF was available for about 2,400 total hours until the hardware failure on April 17. MeF was unavailable to process returns for about 15 hours on April 17. This means that for the filing season, MeF was available 99.4% of the time.
However, due to the inconvenience caused for some taxpayers, the IRS made the decision to give taxpayers another day in case they needed extra time to file their tax returns. Thanks to the hard work of IRS teams working throughout, our systems were back up by late afternoon on April 17.
Overall, as of April 27, 2018, we received about 140 million individual returns — about 90 percent of them were filed electronically. We have issued over 99 million refunds for a total of more than $275 billion. We continue to issue more than 9 out of 10 refunds in less than 21 days, and the average dollar refund this year is about $2,700.
This is the second year IRS has been required by Protecting Americans from Tax Hikes (PATH) Act to hold refunds on all returns claiming the Earned Income Tax Credit or Additional Child Tax Credit until February 15. The IRS holds the entire refund when a taxpayer claims either (or both) of these credits. Last year, the IRS held 10.3 million returns with about $51 billion in refunds. For 2018, the IRS held 9.4 million returns with about $47 billion in refunds until February 15. Taxpayers started seeing these refunds hit their bank accounts on February 27, assuming no further review was required.
In addition to smooth return processing, we again put service first by delivering high levels of customer service during the filing season, both in person and on the phone. I’m pleased to report that during the 2018 filing season, we again saw a strong level of service on our toll-free lines. We achieved an 80 percent telephone level of service during the filing season, which is the highest since 2007. For comparison, the average level of service during the 2017 filing season was 75 percent, and 70 percent for the 2016 filing season. In addition, our assistors answered more calls than in 2017, and taxpayers had to wait less time for their call to be answered.
The IRS has also been successful in providing timely assistance to taxpayers who visit one of our Taxpayer Assistance Centers, or TACs, around the country. This is the second year that all TACs are offering appointments in advance, a process that we have found dramatically cuts wait times for TAC visitors. As in 2017, we had no reports of long lines during the 2018 filing season – clear evidence that the appointment process reduces burden on taxpayers who seek in-person assistance and puts service first.
We have also found this arrangement provides major advantages to taxpayers. First, when people call for an appointment, we can tell them what documents they need to bring with them, reducing the number of return trips. Second, the IRS employee making the appointment can often help taxpayers resolve their issue over the phone or refer them to other resources to obtain the help they need, eliminating the need to even visit a TAC. So far this year, over half of those who called for an appointment were able to resolve their issue without actually having to come in for an appointment. This is an important point, because TAC employees can now spend more time with those who do visit, as they tend to have more complex issues that cannot be resolved over the phone.
And for those taxpayers who do require an appointment, we introduced a new more efficient scheduling tool this year. The new Field Assistance Scheduling Tool, or FAST, was implemented at the end of January, and all appointments made on or after February 5 took advantage of the new tool. The new tool allows our assistors to put service to the customers first by better tailoring appointments based on the customer’s needs. Assistors can easily see any open appointment in the future, not just the next one available. The FAST tool also allows TAC employees to make appointments for customers who arrive at a TAC without one, often on the same day, when time and resources permit. Before the FAST tool, TAC employees could not make appointments and would have to direct customers to call the toll-free line.
This fiscal year through April 28, about 2.0 million people called for an appointment. About a million of these callers had their issue resolved over the phone, or were referred to other resources for help. Taken together with the number of taxpayers we assisted in our TACs, we served about 2.7 million taxpayers so far, this year.
The improvements we’ve made to our face-to-face service not only meet our taxpayers’ needs more efficiently, but will also maintain the high-quality standards to which our customers have become accustomed. The goal of the IRS is to serve taxpayers where they want, in the most efficient way possible, using an omnichannel approach. We are doing this by continuing to provide face-to-face resolution of tax issues and, at the same time, educating taxpayers on services available to them through all channels. Our methods to provide this service continue to adapt with the changing environment.
Overall, the IRS has expanded face-to-face service improvements to include virtual services that are not just limited to brick and mortar sites. We have piloted a program with the Social Security Administration (SSA) to co-locate TACs within SSA office space, and collaborated with community partners to host Virtual Service Delivery (VSD) technology, which enable taxpayers to receive assistance from TAC employees in another geographic area of the country via an IRS computer and high-resolution video capabilities. Currently, we have 37 VSD community partner sites.
All of these efforts – continuing to issue 9 out of 10 refunds within 21 days, answering 8 out of 10 phone calls, making the appointment service more efficient, providing service to taxpayers in the channel they prefer – demonstrate our commitment to putting service first. Our relationship with CERCA that helps get the word out and promotes service through effective communications is another way we demonstrate our commitment to putting service first.
While we were working to deliver the filing season this year, the IRS also had two new pieces of tax legislation to manage. The first was the Tax Cuts and Jobs Act, which was the most sweeping change to tax law in more than 30 years. This new statute requires extensive work by the IRS this year and next to serve the needs of taxpayers and tax professionals. I’ll talk more about tax reform implementation later.
The second was the Bipartisan Budget Act enacted in early February, shortly after the filing season had started. Our IT functions began work immediately after passage of the legislation to reprogram processing systems to handle more than 30 individual and business tax benefits that had expired at the end of 2016.
We quickly reprogrammed processing systems to handle the three benefits most likely to be claimed on returns filed early in the tax season. Affected taxpayers could file key forms beginning February 22 for the exclusion from gross income of discharge of qualified principal residence indebtedness (often, foreclosure-related debt forgiveness); the deduction for mortgage insurance premiums; and the deduction for higher education tuition expenses. Work continued on updating systems for the other affected tax forms and all taxpayers were able to file as they normally would as of April 5. This was the first time the IRS had ever been required to implement retroactive tax extensions this late in a filing season. We put service first by focusing on the parts of the legislation that had the biggest effect on the public and dedicating resources to address those items first.
Every bit as important as efficiently processing tax returns is the IRS’s responsibility for helping taxpayers understand the tax law and assisting them when they have questions. While all of the IRS’s service channels are important, taxpayer needs have been evolving, with more people conducting their business using digital tools at the time and place of their choosing. The IRS has invested significant resources in developing a series of online tools and applications, such as “Where’s My Refund?” so that those who prefer to interact with the IRS online can do so easily and securely. The plan is to put service first by continuing investments in online tools and offerings and modernizing the taxpayer experience.
The IRS provides a wealth of tax information on IRS.gov, which was visited more than 495 million times during Fiscal Year (FY) 2017, and more than 399 million times this filing season. The most heavily used part of our website is the “Where’s My Refund?” electronic tracking tool, which was used about 278 million times in FY 2017, and more than 272 million times this filing season.
Other online applications the IRS has developed in response to increased taxpayer demand for online services include Get Transcript, Online Payment Agreement, and Direct Pay. We are also continuing the development, over time, of online accounts at the IRS where taxpayers can log in securely, obtain the information they need about their account and interact with the IRS as needed.
We took the first step toward a fully functional IRS online account in 2016, and will be adding features as they are developed and tested with taxpayers and tax professionals.
Another important aspect of taxpayer service, during the filing season and throughout the year, involves the IRS’s efforts to protect IRS systems and taxpayers’ personal data from tax-related identity theft. Over the last several years, the IRS has made significant progress in this area.
Much of that progress is the result of Security Summit initiatives that help safeguard the nation’s taxpayers. In fact, the 2018 filing season was the third in which the IRS worked with its Security Summit partners to put in place many protections to help stop fraudulent returns from entering tax processing systems.
Through the efforts of the Security Summit partners, we’ve seen the number of identity theft-related tax returns fall by about two-thirds since 2015. Over the past two years, fewer false returns have entered the system, fewer fraudulent refunds have been issued and fewer taxpayers have reported to the IRS that they were victims of identity theft.
Because of Security Summit workgroup efforts, there have been significant declines in the number of taxpayers reporting they are victims of tax-related identity theft, declines in the number of confirmed fraudulent returns, and declines in fraudulent refunds being issued. But despite all the progress that has been made, we realize we cannot let up in the fight against tax-related identity theft. As we have strengthened our defenses, identity thieves are becoming more sophisticated, and attempting to obtain more detailed financial information to help them do a better job of impersonating legitimate taxpayers and file more realistic-looking tax returns to attempt to obtain fraudulent refunds.
Cyberthieves have targeted tax professionals, human resources departments, businesses, and other places with large amounts of sensitive financial information. For that reason, the IRS and its partners are putting service first by not only continuing to improve our safeguards against fraudulent returns, but also continuing to encourage taxpayers, tax professionals and businesses to do everything they can to protect their data and avoid becoming victims of the tax scams that continue to proliferate.
So that’s a look at where we stand today. I’d like to turn now to provide a little more information about tax reform implementation from the 50,000-foot level. Implementing the new tax law is one of the IRS’s highest priorities, and will be a major Service-wide effort for some time. The work to implement tax reform will touch on many aspects of the tax system affecting both individual and business taxpayers. Our top priority is to put service first by ensuring everyone can navigate and understand these changes, and be able to file their returns next filing season as quickly and easily as possible.
Implementing the Tax Cuts and Jobs Act involves creating or changing a large number of forms and publications, updating scores of tax processing systems, retraining our workforce, and educating the taxpaying public about the changes. This is a major effort, and we will need the help of the nation’s tax community to roll out these changes.
We started by setting up the Tax Reform Implementation Office, or TRIO, in January of this year. The TRIO has centralized responsibility for leading the Service-wide, coordinated implementation of the tax reform provisions. The TRIO is responsible for engaging our business divisions, Office of Chief Counsel, and Treasury to ensure a smooth roll-out of everything needed to implement the law. Where there is overlap in responsibilities, the TRIO will ensure IRS divisions collaborate to get the job done. The TRIO has a broad portfolio: it is responsible for identifying areas of impact, establishing and monitoring an enterprise-wide project plan, ensuring communication with external and internal stakeholders, and making sure we address any risks that arise in our work.
In another example of putting service first, early on, we identified income tax withholding as an area in which it was critical to implement changes in response to the new law as soon as possible. This issue affects literally every taxpayer who receives a paycheck. In early January, we released updated withholding tables for 2018 that reflect the increase in the standard deduction, repeal of personal exemptions, and changes in tax rates and brackets. The new tables were designed to produce the right amount of withholding for people with simple tax situations. We updated Publication 15, which employers use to help businesses apply the changes; and Publication 505 which explains the pay-as-you-go federal tax system. We also revised the Form W-4 for employees to tell their employers how much tax to withhold.
Our Online Services organization worked with Research to update the online withholding calculator on IRS.gov that taxpayers can use to determine if the right amount of tax is being withheld from their paychecks. In late March, our Communications group conducted a “Paycheck Checkup” public awareness campaign designed to get the word out to taxpayers about what they can do to make sure the correct amount of tax is being withheld from their pay. The activities during this special weeklong campaign included the release of an IRS YouTube video series and several online Tax Tips. These were designed to walk taxpayers through what they need to know about withholding, and help them navigate complex issues that might affect how much should be withheld from their pay.
We anticipate making additional changes involving withholding for the 2019 filing season. The IRS will work with the business and payroll communities to encourage their workers to file new W-4s for next year where appropriate, and to share information with workers on changes in the new tax law that affect withholding
I’d now like to give you an idea of how we’re moving forward to implement the new law.
One major area involves taxpayer forms, instructions and publications. We estimate we will need to create or revise more than 400 of them, most in time for next filing season. This is a tall order. It’s more than double the number of forms we would create or revise in a typical year.
Another major area is the legal guidance we need to provide to taxpayers and tax professionals. This includes both formal published guidance, such as regulations and notices, and what we call “soft” guidance, such as press releases and Frequently Asked Questions.
Our Office of Chief Counsel is taking the lead with formal guidance, and is hard at work, not only analyzing the provisions of the new tax law to determine what guidance is needed and how quickly it can be issued, but also putting pen to paper to address items that need further interpretation and clarification. In February, we gave everyone an initial idea of where we’re headed with our latest update to the 2017-2018 Priority Guidance Plan. The revised plan contains 18 new regulatory projects related to tax reform. Just last month, we opened the 2018-2019 Priority Guidance Plan for public comment.
While these efforts will take time, we have already issued guidance to help corporations begin complying with the transition new transition rules. We issued this guidance shortly after the Tax Cuts and Jobs Act was passed into law last December, and are continuing to provide guidance on this provision. Another area where there is a critical need for guidance is the section 199A deduction for qualified business income of pass-through entities. This is a very challenging area where we are working to develop guidance as quickly as possible.
Along with developing forms and guidance, implementing tax reform also requires the reprogramming of IRS information technology systems. We anticipate we will have to modify about 140 systems, with special focus on returns processing and compliance systems. These must be ready when the bulk of the new tax law’s provisions start showing up on returns in January of 2019. This work involves planning, reprogramming and testing each of those systems. Along with testing to make sure everything works as intended, we also need to conduct security testing to ensure we are protecting IRS network and taxpayer data.
Yet another major component of our effort involves ensuring we have the right employees with the necessary tools to effectively do their jobs, through hiring and extensive training. This training will be needed to so that familiarize our employees have the right level of proficiency with the new tax law. It’s critical to get our workforce up to speed on all areas of the tax law, so that we can continue putting service first by assisting the taxpaying public and providing the most effective, courteous service possible to help them fulfill their tax obligations.
We anticipate strong taxpayer demand for assistance in navigating the new tax law. Taxpayer calls to the IRS rose 14 percent after the 1986 tax act became effective, and eight percent in the year after enactment of the Affordable Care Act. We estimate we’ll get at least four million additional calls for assistance with the new tax law. We need to ensure IRS employees can provide accurate information in response to taxpayer inquiries about the new law’s requirements.
But we don’t plan to wait for people to call us. We are putting service first by preparing proactive education and outreach to help taxpayers, tax professionals, and other industry partners understand how the law applies to them. Our Communications and Liaison operation is gearing up for a major education effort to increase awareness of these new tax provisions, and help the public understand what steps they might need to take. We will be conducting events and sessions across the country for both taxpayers and tax professionals.
This summer, the IRS will again be conducting its Nationwide Tax Forums for tax professionals in five cities around the country, where the new tax law will take center stage. We will also develop and share educational materials, posting them on IRS.gov, and getting the word out through social and traditional media.
To do everything I’ve just talked about and ensure implementation goes smoothly, the IRS needs sufficient resources. Along those lines, I’m pleased to note that the omnibus budget bill passed by Congress includes $320 million in funding for tax reform implementation in Fiscal Years 2018 and 2019.
Most of this funding, about 70 percent, will go to reprogramming and testing our IT systems in time for the 2019 filing season. The remaining funds will be used to cover the cost of developing new forms, hiring about 1,000 extra seasonal employees to handle the expected increase in the volume of phone calls and correspondence from taxpayers with questions about the new law, training our new and existing customer service representatives on the various tax law provisions, and hiring additional employees in other various parts of the agency to assist with implementation, such as in the Office of Chief Counsel, where additional staffing is needed to support the work involved in publishing guidance and providing technical support to efforts such as the revisions to forms and publications.
I hope that gives you an overview of where we are headed on implementing tax reform. There are other tax reform provisions that affect corporations will require guidance for affect corporations that will require guidance, such as the limits on deducting business interest, and in the international area, such as the deduction for foreign-derived intangible income and global intangible low-taxed income. Rest assured, there are several guidance projects underway to assist with the implementation of these and other critical provisions.
We are working closely with the Treasury Department on most of the provisions that are being implemented. As we implement all of the provisions, we are also looking to our partners in the tax professional community for help and support.
So that’s where we are on tax reform. As you can see, we have some major challenges ahead of us. Tax reform is a massive effort for the IRS. We have a great deal of work ahead over the coming months and well into next year. As we continue our efforts to meet these challenges and preserve the integrity of the tax system, we are grateful to have the members of CERCA as our partners. We in W&I have worked hard to strategically engage with industry to obtain their technical input. We believe these activities are important for the success of the filing season and beyond, and have helped contribute to a strong partnership with you to share necessary information in both directions and help keep our focus on putting service first. My intention is to continue to engage with you, and assure you have what you need to service our shared customer, the taxpayer. Thank you.